Google has a massive market share which is reflective of it’s huge influence on society. Therefore, naturally, many people have questioned whether Google has been abusing it’s power over the Internet and exploiting Google search engine users for it’s own benefit since it has the potential to quite easily do so. Recently, the European Commission accused Google of breaching antitrust laws (more on this later) which resulted in a large fine for the company. But, this fine was nothing more than a tiny fraction of Google’s total net worth… Nevertheless, it is a step towards taming these large companies and ensuring that they act in order to protect the interests of their consumers.
I’d like to start by explaining what antitrust laws are: they are rules designed to ensure that there is a fair amount of competition in a particular market. In other words, they prevent a single firm being so powerful in a market that other companies are unable to enter the market and provide some healthy rivalry. They also protect consumer welfare which is the well-being of customers.
In terms of internet search engines, I think it’s clear that Google has a huge market share compared to other search engines. Just look at the graph below; it speaks for itself. This clear dominance in the search engine market can cause problems relating to the control of competition and antitrust policies as we’ll soon see.
The European Commission investigated Google for the past 7 years to check whether Google had violated antitrust laws in Europe. Specifically, they were looking at a possible abuse of power in the domain of online shopping. In short, at the end of the investigation, they came to the decision that yes, Google had breached antitrust laws and were liable to pay a fine of €2.4 billion. This may sound like a huge sum of money to the ordinary person walking on the street, however, it’s hardly anything for Google; it’s simply a drop in the ocean. Nevertheless, ultimately, it’s not about the fine, it’s about stopping Google from acting in an unreasonable manner towards it’s users.
I want to get into some more details about the investigation conducted by the European Commission and what they found so that we can understand how large firms are able to manipulate their customers. It all started with a company called Foundem, an online comparison website, who filed a complaint to the European Commission with regards to the unfair treatment of their website in the Google search engine. Before the complaint was filed, Foundem was doing pretty well with their business – their digital service was attracting a positive response from consumers so they felt as though they were headed on the right track.
However, on the 26th June 2006, something unexpected happened. Foundem experienced a sudden, large decrease in internet traffic, which was unusual for them, to say the least. It was later discovered that ‘changes in Google’ made Foundem jump from 4th to 47th in Google search results. The same was also true of other comparison shopping sites who were all rivals to Google’s own comparison site called Froogle. This lead to even more complaints being filed to the European Commission and an official investigation being launched.
Froogle wasn’t as successful as Foundem, so it’s logical to assume that Google had purposely tried to make Foundem less competitive by moving it lower down in the search results in order to boost Froogle’s traffic. In addition, Google started to turn it’s shopping results, which were found by Froogle, into paid advertisements. This gave Froogle even more attention compared to Foundem, despite the fact that Foundem may have provided a higher quality service.
If one company is obviously better than another company leading to that company reducing competition, this is not a violation of antitrust regulation. Antitrust law is focused on consumer welfare – are companies purposefully acting in a way which harms users? Essentially, Google was intentionally preventing Google search engine users from accessing online services which were in strong rivalry with Google’s own online services – this is an unfair competitive advantage which reduces consumer welfare and disobeys antitrust regulations. Therefore, the European Commission accused Google of breaching it’s antitrust rules.
The European Commission summed it up like this:
“What Google has done is illegal. […] It has denied European consumers the benefits of competition.”
That is exactly what antitrust policy is about, it is about allowing customers to have access to competition in order to increase their welfare. Google clearly didn’t allow their users to have this opportunity, which led to them being penalised. This is certainly a step in the right direction to ensure that large companies don’t deny customers access to goods and services provided by other, rival companies.
For some further details into the investigation carried out by the European Commission, including evidence, consequences of the decision and other cases against Google, check out the official press release on the European Commission’s website. That’s it for now, please share your thoughts in the comments below. Thanks.